Asian markets track Wall St and Europe rally after Trump-Xi talks

Asian markets rose on Monday, buoyed by a rally on Wall Street and a record-breaking day in Europe, with sentiment lifted by positive discussions between Donald Trump and Chinese President Xi Jinping. The talks helped ease concerns about Trump's second term, particularly regarding his hardline stance on trade and tariffs, which had sparked fears of a renewed trade war between the US and China. Trump and Xi's commitment to improving US-China relations, including balancing trade and addressing issues like fentanyl and TikTok, provided optimism for investors.

Despite this, there remained caution ahead of Trump's inauguration later in the day. Investors were worried that Trump's proposed tax cuts, deregulation, and immigration policies could reignite inflation, potentially leading to the Federal Reserve holding off on further interest rate cuts or even raising rates.

Global markets responded positively to the news of the Trump-Xi talks. The S&P 500 rose 1%, while the Nasdaq gained 1.5%. European markets also saw gains, with London and Frankfurt reaching new all-time highs. In Asia, Hong Kong led the way with a 2% rise, reflecting hopes that the feared trade war could be avoided. Other markets, including Tokyo, Shanghai, Sydney, Taipei, Manila, and Jakarta, also saw increases. However, Singapore and Wellington experienced declines, and Seoul's gains were limited due to concerns over South Korea's political and economic situation.

Currency markets saw the yen slightly rise against the dollar ahead of the Bank of Japan's policy meeting this week, with expectations of a potential rate hike. Meanwhile, oil prices were mixed, with West Texas Intermediate rising slightly, while Brent crude edged down.

Overall, markets are bracing for significant policy changes under Trump's new administration, particularly in taxes, trade, and spending, which could bring both opportunities and risks to the global economy.